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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2021
or
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____________ to _____________

Commission File Number: 001-38794

https://cdn.kscope.io/5315e8c61212498dd0a0058f62c6c7ba-cvet-20210930_g1.gif
COVETRUS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
83-1448706
(State or other jurisdiction of
incorporation)
(I.R.S. Employer
Identification No.)
7 Custom House Street
Portland, ME 04101
Tel: (888) 280-2221

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

    Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareCVETNasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
The registrant had 137,783,356 shares of common stock outstanding as of October 29, 2021.


Table of Contents

TABLE OF CONTENTS
Page

Covetrus, Inc. 2021 Q3 Form 10-Q
2

Table of Contents
Glossary of Defined Terms and Abbreviations from our Form 10-K and Form 10-Q

AAFCOAssociation of American Feed Control Officials
Acquisition*
Our acquisition of Vets First Choice in an all-stock transaction
Adjusted EBITDA*
Adjusted EBITDA is the segment measure of profit or loss reported to the CODM. Adjusted EBITDA excludes share-based compensation, strategic consulting, transaction costs, formation of Covetrus expenses, separation programs and executive severance, carve-out operating expenses, certain IT infrastructure expenses necessary to establish ourselves as a newly public company, goodwill impairment charges, capital structure-related fees, operating lease right-of-use asset impairments, the proportionate share of the adjustments of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%, managed exits from businesses we are exiting or closing, and other income and expense items, net. Non-GAAP Adjusted EBITDA on a total segment basis is reconciled in Note 3 - Segment Data as required by ASC 280
AIP*Annual Incentive Plan
Investment and Shareholders Agreement*
The Investment and Shareholders Agreement of Distrivet, S.A. executed on January 13, 2020
Animal Health Business*Former Parent's spun-off animal-health business
Animal Owners*Clients of our Customers
APACAsia Pacific
AppointMaster*AppointMaster, LLC
APVMAAustralian Pesticides and Veterinary Medicines Authority
ASCAccounting Standards Codification
ASUAccounting Standards Update
B/(W)Better/(Worse)
BEATBase Erosion & Anti-Abuse Tax
CEOChief Executive Officer
CARES Coronavirus Aid, Relief, and Economic Security Act
CCPACalifornia Consumer Privacy Act
CFOChief Financial Officer
CODMChief Operating Decision Maker
COVID-19Novel Coronavirus Disease 2019
Credit Facilities*
On February 7, 2019, we entered into a $1.5 billion syndicated credit agreement with a group of lenders for a five-year term
Customers*Veterinarians and animal-health practitioners
CVMCenter for Veterinary Medicine
DEAU.S. Drug Enforcement Administration
DGCLDelaware General Corporation Law
Defendants*The Company, our Former Parent, our former Chief Executive Officer and President, and our former Chief Financial Officer, collectively
Distribution*All the shares of our common stock that were then owned by our Former Parent were distributed to its stockholders of record as of January 17, 2019. Concurrent with the Distribution, we paid a cash dividend of $1.2 billion to our Former Parent from loan proceeds from our newly established Term Loan Facility
Distrivet*On April 30, 2020, we combined our subsidiary, SAHS, with Distrivet, S.A. to form a leading animal-health provider on the Iberian Peninsula. We own 50.01% of the company, called Distrivet, a Covetrus company
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization
EFTAEuropean Free Trade Area
EFSAEuropean Food Safety Authority
EMAEuropean Medicines Agency
EPAEnvironmental Protection Agency
EPSBasic earnings (loss) per common share
ESGEnvironmental, social, and corporate governance
ESPPEmployee Stock Purchase Plan
Exchange ActSecurities Exchange Act of 1934, as amended
FCMAFellow Chartered Management Accountant
FDAU.S. Food and Drug Administration
Covetrus, Inc. 2021 Q3 Form 10-Q
3

Table of Contents
FDIIForeign-derived Intangible Income
Form 10-K
Audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020
Form 10-Q or ReportQuarterly Report on Form 10-Q
Former Parent*Henry Schein, Inc.
FTCFederal Trade Commission
GAAPGenerally Accepted Accounting Principles in the United States of America
GDPREU General Data Protection Regulation
GFIGuidance for Industry
GILTIGlobal Intangible Low-Taxed Income
Global Technology Solutions or GTS*The aggregation of our software services with our prescription management platform and related pharmacy services
IRSInternal Revenue Service
ITGCInformation Technology General Controls
LIBORLondon Interbank Offered Rate
NMNot Meaningful
NYSENew York Stock Exchange
NZ EPANew Zealand Environmental Protection Authority
OSHA
Department of Labor’s Occupational Safety and Health Administration
PSUPerformance Stock Unit
Revolving Credit Facility*
$300 million revolving line of credit for working capital and general corporate purposes
RSARestricted Stock Award
RSURestricted Stock Unit
SAHS*Spain Animal Health Solutions S.L.U.
scilscil animal-care business
SECSecurities and Exchange Commission
Separation*In anticipation of the spin-off, affiliates of Covetrus purchased from certain minority holders their ownership interests in the applicable operating companies of the Animal Health Business. On February 7, 2019, our Former Parent completed the spin-off of its Animal Health Business and transferred the applicable assets, liabilities, and ownership interests to us
Series A Preferred Shares*7.50% Series A Convertible Preferred Stock
SG&A
Selling, general and administrative expenses
Share Sale*On February 7, 2019 and prior to the Distribution, we sold $361 million in shares to accredited institutional investors. The proceeds from the Share Sale were paid to us and distributed to our Former Parent
SMBSmall or Medium-Sized Business
Term Loan Facility*$1.2 billion term loan facility
Transactions*Collectively the following events, effective February 7, 2019, Vets First Choice became a wholly-owned subsidiary of Covetrus, Inc. (f/k/a HS Spinco, Inc.), a company formed by our Former Parent in connection with the spin-off of the Animal Health Business and combination with Vets First Choice
TSATransition Service Agreements
U.K.United Kingdom
USDU.S. Dollar
USDAU.S. Department of Agriculture
VCP*Veterinary Care Plans
Vets First Choice*Direct Vet Marketing, Inc. (d/b/a Vets First Choice)
VMDVeterinary Medicines Directorate
VSG*Veterinary Study Groups, Inc.
Covetrus, Company, we, us, our, or ourselvesCovetrus, Inc. and its consolidated subsidiaries, collectively
XBRLeXtensible Business Reporting Language
*Defined term or abbreviation is specific to Covetrus
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PART I

Item 1. Condensed Consolidated Financial Statements

COVETRUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
September 30, 2021December 31, 2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$187 $290 
Accounts receivable, net of allowance of $4 and $5
491 507 
Inventories, net552 530 
Other receivables77 67 
Prepaid expenses and other44 26 
Total current assets1,351 1,420 
Non-current assets:
Property and equipment, net of accumulated depreciation of $125 and $106
127 116 
Operating lease right-of-use assets, net120 117 
Goodwill1,247 1,187 
Other intangibles, net of accumulated amortization of $562 and $470
479 555 
Investments and other96 101 
Total assets$3,420 $3,496 
LIABILITIES, MEZZANINE EQUITY, AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $428 $411 
Current maturities of long-term debt and other borrowings46 1 
Accrued payroll and related liabilities 62 67 
Accrued taxes 37 37 
Other current liabilities 141 175 
Total current liabilities714 691 
Non-current liabilities:
Long-term debt and other borrowings, net1,027 1,068 
Deferred income taxes 18 28 
Other liabilities 136 136 
Total liabilities1,895 1,923 
Commitments and contingencies (Note 6)
Mezzanine equity:
Redeemable non-controlling interests (Note 11)23 36 
Shareholders' equity:
Common stock, $0.01 par value per share, 675,000,000 shares authorized; 137,731,865 shares issued and outstanding as of September 30, 2021; 136,017,964 shares issued and outstanding as of December 31, 2020
1 1 
Accumulated other comprehensive loss (Note 10)(80)(66)
Additional paid-in capital2,659 2,629 
Accumulated deficit(1,078)(1,027)
Total shareholders’ equity1,502 1,537 
Total liabilities, mezzanine equity, and shareholders’ equity$3,420 $3,496 
See notes to unaudited condensed consolidated financial statements.
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COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts) (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net sales (Note 4)$1,162 $1,126 $3,453 $3,217 
Cost of sales946 929 2,807 2,625 
Gross profit216 197 646 592 
Operating expenses:
Selling, general and administrative220 224 662 642 
Operating income (loss)(4)(27)(16)(50)
Other income (expense):
Interest expense, net(8)(10)(26)(37)
Other, net(2)5 (2)79 
Income (loss) before taxes(14)(32)(44)(8)
Income tax benefit (expense) (Note 7)10 (3)(7)(6)
Net income (loss)(4)(35)(51)(14)
Net (income) loss attributable to redeemable non-controlling interests   (1)
Net income (loss) attributable to Covetrus$(4)$(35)$(51)$(15)
Earnings (loss) per share: (Note 5)
Basic$(0.03)$(0.33)$(0.37)$(0.18)
Diluted$(0.03)$(0.33)$(0.37)$(0.18)
Weighted-average common shares outstanding:
Basic137116138113
Diluted137116138113
See notes to unaudited condensed consolidated financial statements.
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COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions) (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income (loss)$(4)$(35)$(51)$(14)
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)(13)14 (17)(2)
Gain (loss) on derivative instruments(1)(1)3 (8)
Total other comprehensive income (loss)(14)13 (14)(10)
Comprehensive income (loss)(18)(22)(65)(24)
Comprehensive (income) loss attributable to redeemable non-controlling interests:
Net (income) loss   (1)
Foreign currency translation (gain) loss   (2)
Comprehensive (income) loss attributable to redeemable non-controlling interests   (3)
Comprehensive income (loss) attributable to Covetrus$(18)$(22)$(65)$(27)
See notes to unaudited condensed consolidated financial statements.
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COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions, except share amounts) (Unaudited)
Three Months Ended September 30, 2021
Common StockAccumulated Other Comprehensive Income (Loss)Additional
Paid-in
Capital
Accumulated DeficitTotal Shareholders' Equity
SharesAmount
Balance at June 30, 2021137,359,704 $1 $(66)$2,641 $(1,074)$1,502 
Net income (loss) attributable to Covetrus— — — — (4)(4)
Issuance of shares in connection with acquisitions146,633 — — 4 — 4 
Issuance of shares in connection with share-based compensation plans, net of shares withheld for taxes225,528 — — — —  
Share-based compensation— — — 14 — 14 
Other comprehensive income (loss)— — (14)— — (14)
Balance at September 30, 2021137,731,865 $1 $(80)$2,659 $(1,078)$1,502 
Nine Months Ended September 30, 2021
Common StockAccumulated Other Comprehensive Income (Loss)Additional
Paid-in
Capital
Accumulated DeficitTotal Shareholders' Equity
SharesAmount
Balance at December 31, 2020136,017,964 $1 $(66)$2,629 $(1,027)$1,537 
Net income (loss) attributable to Covetrus— — — — (51)(51)
Issuance of shares in connection with acquisitions146,633 — — 4 — 4 
Issuance of shares in connection with share-based compensation plans, net of shares withheld for taxes1,567,268 — — (11)— (11)
Redeemable non-controlling interest redemption value adjustment— — — (2)— (2)
Share-based compensation— — — 39  39 
Other comprehensive income (loss)— — (14)— — (14)
Balance at September 30, 2021137,731,865 $1 $(80)$2,659 $(1,078)$1,502 
See notes to unaudited condensed consolidated financial statements.




















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COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
(In millions, except share amounts) (Unaudited)
Three Months Ended September 30, 2020
Common StockAccumulated Other Comprehensive Income (Loss)Additional
Paid-in
Capital
Accumulated DeficitTotal Shareholders' Equity
SharesAmount
Balance at June 30, 2020112,674,657 $1 $(107)$2,362 $(983)$1,273 
Net income (loss) attributable to Covetrus— — — — (35)(35)
Redeemable non-controlling interest redemption value adjustment— — — (6)— (6)
Issuance of shares in connection with share-based compensation plans, net of shares withheld for taxes331,297 — — 2 — 2 
Share-based compensation— — — 11 — 11 
Series A preferred stock cash dividend— — — — (4)(4)
Conversion of Series A preferred stock14,357,478 — — 156 — 156 
Other comprehensive income (loss)— — 16 — — 16 
Balance at September 30, 2020127,363,432 $1 $(91)$2,525 $(1,022)$1,413 
Nine Months Ended September 30, 2020
Common StockAccumulated Other Comprehensive Income (Loss)Additional
Paid-in
Capital
Accumulated DeficitTotal Shareholders' Equity
SharesAmount
Balance at December 31, 2019111,620,507 $1 $(86)$2,339 $(1,001)$1,253 
Net income (loss) attributable to Covetrus— — — — (15)(15)
Redeemable non-controlling interest redemption value adjustment— — — (6)— (6)
Issuance of shares in connection with share-based compensation plans, net of shares withheld for taxes1,385,447 — — 6 — 6 
Share-based compensation— — — 30 — 30 
Series A preferred stock cash dividend— — — — (6)(6)
Conversion of Series A preferred stock14,357,478 — — 156 — 156 
Other comprehensive income (loss)— — (5)— — (5)
Balance at September 30, 2020127,363,432 $1 $(91)$2,525 $(1,022)$1,413 
See notes to unaudited condensed consolidated financial statements.









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COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net income (loss)$(51)$(14)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization128 124 
Amortization of right-of-use assets21 18 
Operating lease right-of-use asset impairment 8 
Gain on divestiture of a business (72)
Share-based compensation expense39 30 
Benefit for deferred income taxes(16)(7)
Amortization of debt issuance costs4 4 
Loss on managed exit of a business 8 
Other4 1 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net6 (77)
Inventories, net(33)99 
Other assets and liabilities(58)(48)
Accounts payable and accrued expenses14 (63)
Net cash provided by (used for) operating activities58 11 
Cash flows from investing activities:
Purchases of property and equipment(38)(40)
Payments related to equity investments and business acquisitions, net of cash acquired(81)(13)
Proceeds from divestiture of a business, net 104 
Proceeds from sale of property and equipment 4 
Net cash provided by (used for) investing activities(119)55 
Cash flows from financing activities:
Proceeds from revolving credit facility 190 
Repayment of revolving credit facility (190)
Principal payments of debt (62)
Debt issuance and amendment costs (5)
Proceeds from share-based awards4 7 
Tax payments related to share-based awards(15)(1)
Proceeds from issuance of Series A preferred stock 250 
Series A preferred stock issuance costs (6)
Series A preferred stock dividend (6)
Distributions to non-controlling shareholders(2) 
Deferred payments related to equity investments and business acquisitions(13)(17)
Payments related to the buy-out of non-controlling interests in subsidiaries of Covetrus(11) 
Net cash provided by (used for) financing activities(37)160 
Effect of exchange rate changes on cash and cash equivalents(5)(1)
Net change in cash and cash equivalents(103)225 
Cash and cash equivalents, beginning of period290 130 
Cash and cash equivalents, end of period$187 $355 
Supplemental disclosures of non-cash investing and financing activities:
Conversion of Series A preferred stock$ $156 
Right-of-use assets obtained in exchange for new operating lease liabilities$26 $60 
Deconsolidation of a subsidiary$ $15 
Common stock issued in business acquisition$4 $ 
See notes to unaudited condensed consolidated financial statements.
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)

1. BUSINESS OVERVIEW AND SIGNIFICANT ACCOUNTING POLICIES

Business

We are a global animal-health technology and services company dedicated to supporting the companion, equine, and large-animal veterinary markets.

Basis of Presentation and Principles of Consolidation

The accompanying balance sheet as of December 31, 2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021, have been prepared in accordance with applicable rules and regulations of the SEC for interim financial reporting. Pursuant to those rules and regulations, we omitted certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP.

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all recurring adjustments and transactions necessary for a fair statement of our financial position, results of operations, and cash flows for the interim periods presented. Such operating results are not necessarily indicative of annual or future results. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the Form 10-K filed with the SEC on March 1, 2021.

The accompanying unaudited condensed consolidated financial statements include the operations of the Company, as well as those of our wholly-owned and majority-owned subsidiaries from their respective dates of inception or acquisition. All significant intercompany transactions and balances were eliminated in consolidation. Investments in unconsolidated affiliates, which are 20% to 50.01% owned, or investments of less than 20% in which we could influence the operating or financial decisions, are accounted for under the equity method.

Certain prior period amounts were reclassified or rounded to conform to the presentation of the current period.

Accounting Pronouncements

As of January 1, 2021, we adopted ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which removes specific technical exceptions to general principles found in Topic 740, items that often produce information that investors have difficulty understanding, and simplifies the accounting for income taxes. The adoption of this ASU did not have a material impact on the results of our condensed consolidated financial statements.

ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference LIBOR. The standard is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. Our debt agreements that utilize LIBOR have not yet discontinued the use of LIBOR and, therefore, this ASU is not yet effective for us. The banking syndicate associated with our Credit Facilities intends to cease using the 1-week and 2-month USD LIBOR at the end of 2021, with the other USD Tenors to cease June 30, 2023. We will continue to monitor, and, to the extent our Credit Facilities require amendment to reflect a replacement rate prior to December 31, 2022, we will evaluate the benefits of adopting this ASU.

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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
2. BUSINESS ACQUISITIONS

During the three and nine months ended September 30, 2021, we completed acquisitions of VCP, a leading platform in veterinary wellness plan administration, and AppointMaster, a provider of integrated communications solutions for veterinary practices, for an aggregate purchase price of $85 million. These acquisitions are intended to provide our Customers with new tools to foster stronger relationships with their Animal Owner clients by delivering better business and healthcare outcomes. The allocation of the aggregate purchase price resulted in goodwill of $60 million and other intangible assets, including technology, of $31 million. The results of operations have been included in our North American segment since the acquisition dates. All acquisition expenses incurred were not material. The transactions are not material business combinations or material to our condensed consolidated financial statements individually or in the aggregate.


3. SEGMENT DATA

The following tables reflect our segment and corporate information and reconciles non-GAAP Adjusted EBITDA for reportable segments to consolidated Net income (loss) attributable to Covetrus:
Three Months Ended September 30, 2021
North AmericaEuropeAPAC & Emerging MarketsCorporateEliminationsTotal
Net sales$697 $353 $116 $ $(4)$1,162 
Adjusted EBITDA$55 $16 $10 $(23)$ $58 
Reconciliation of Net income (loss) attributable to Covetrus to Non-GAAP Adjusted EBITDA:
Net income (loss) attributable to Covetrus$(4)
Plus: Depreciation and amortization42 
Plus: Interest expense, net8 
Plus: Income tax (benefit) expense(10)
Earnings (loss) before interest, taxes, depreciation, and amortization36 
Plus: Share-based compensation14 
Plus: Strategic consulting (a)
2 
Plus: Transaction costs (b)
1 
Plus: Separation programs and executive severance3 
Plus: Equity method investment and non-consolidated affiliates (c)
1 
Plus: Other items, net1 
Non-GAAP Adjusted EBITDA$58 
(a) Includes third-party consulting services
(b) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures
(c) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
Three Months Ended September 30, 2020
North AmericaEuropeAPAC & Emerging MarketsCorporateEliminationsTotal
Net sales$618 $403 $108 $ $(3)$1,126 
Adjusted EBITDA$45 $19 $8 $(13)$ $59 
Reconciliation of Net income (loss) attributable to Covetrus to Non-GAAP Adjusted EBITDA:
Net income (loss) attributable to Covetrus$(35)
Plus: Depreciation and amortization41 
Plus: Interest expense, net10 
Plus: Income tax (benefit) expense3 
Earnings (loss) before interest, taxes, depreciation, and amortization19 
Plus: Share-based compensation11 
Plus: Strategic consulting (a)
3 
Plus: Transaction costs (b)
1 
Plus: Formation of Covetrus (c)
4 
Plus: Separation programs and executive severance2 
Plus: IT infrastructure1 
Plus: Equity method investment and non-consolidated affiliates (d)
1 
Plus: Operating lease right-of-use asset impairment8 
Plus: France managed exit (e)
8 
Plus: Other items, net1 
Non-GAAP Adjusted EBITDA$59 
(a) Includes third-party consulting services
(b) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures
(c) Includes professional and consulting fees, duplicative costs associated with transition service agreements, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company
(d) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%
(e) Includes $7 million of severance costs and $1 million of other costs
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
Nine Months Ended September 30, 2021
North AmericaEuropeAPAC & Emerging MarketsCorporateEliminationsTotal
Net sales$2,045 $1,080 $342 $ $(14)$3,453 
Adjusted EBITDA$166 $57 $29 $(71)$ $181 
Reconciliation of Net income (loss) attributable to Covetrus to Non-GAAP Adjusted EBITDA:
Net income (loss) attributable to Covetrus$(51)
Plus: Depreciation and amortization128 
Plus: Interest expense, net26 
Plus: Income tax (benefit) expense 7 
Earnings (loss) before interest, taxes, depreciation, and amortization110 
Plus: Share-based compensation39 
Plus: Strategic consulting (a)
16 
Plus: Transaction costs (b)
3 
Plus: Formation of Covetrus (c)
2 
Plus: Separation programs and executive severance5 
Plus: Equity method investments and non-consolidated affiliates (d)
2 
Plus: Other items, net4 
Non-GAAP Adjusted EBITDA$181 
(a) Related to third-party consulting services. Included within this line item are variable performance fees earned for services rendered under a third-party consulting agreement. This agreement was amended in April 2021 and, in connection with such amendment, the services were completed and fees were fully accrued for as of June 30, 2021
(b) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures
(c) Includes professional and consulting fees, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company
(d) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
Nine Months Ended September 30, 2020
North AmericaEuropeAPAC & Emerging MarketsCorporateEliminationsTotal
Net sales$1,771 $1,166 $288 $ $(8)$3,217 
Adjusted EBITDA$141 $53 $20 $(44)$ $170 
Reconciliation of Net income (loss) attributable to Covetrus to Non-GAAP Adjusted EBITDA:
Net income (loss) attributable to Covetrus$(15)
Plus: Depreciation and amortization124 
Plus: Interest expense, net37 
Plus: Income tax (benefit) expense6 
Earnings (loss) before interest, taxes, depreciation, and amortization152 
Plus: Share-based compensation30 
Plus: Strategic consulting (a)
13 
Plus: Transaction costs (b)
8 
Plus: Formation of Covetrus (c)
17 
Plus: Separation programs and executive severance4 
Plus: IT infrastructure3 
Plus: Equity method investment and non-consolidated affiliates (d)
1 
Plus: Operating lease right-of-use asset impairment8 
Plus: France managed exit (e)
8 
Plus: Capital structure2 
Less: Other items, net (f)
(76)
Non-GAAP Adjusted EBITDA$170 
(a) Includes third-party consulting services
(b) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures
(c) Includes professional and consulting fees, duplicative costs associated with transition service agreements, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company
(d) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%
(e) Includes $7 million of severance costs and $1 million of other costs
(f) Includes a $72 million gain on the divestiture of scil and a $1 million gain on the deconsolidation of SAHS

See Note 4 - Revenue from Contracts with Customers for our revenue disaggregated by major product category and reportable segment.

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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
4. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The tables below present our revenue disaggregated by major product category and reportable segment.
Three Months Ended September 30, 2021
Supply Chain ServicesSoftware ServicesPrescription ManagementEliminationsTotal
North America$570 $20 $129 $(22)$697 
Europe354 3  (4)353 
APAC & Emerging Markets114 2   116 
Eliminations(4)  — (4)
Total Net sales$1,034 $25 $129 $(26)$1,162 
Three Months Ended September 30, 2020
Supply Chain ServicesSoftware ServicesPrescription ManagementEliminationsTotal
North America$512 $20 $104 $(18)$618 
Europe404 2  (3)403 
APAC & Emerging Markets106 2   108 
Eliminations(3)  — (3)
Total Net sales$1,019 $24 $104 $